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How Edward Snowden Could Derail the Global Economy

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NSA leaker Edward Snowden is at it again. This time, he’s leaking to the Germans.

Over the weekend Der Spiegel magazine published a report indicating that the United States has been spying on its European allies, including Germany, France and Italy. Documents provided by Snowden indicate that NSA is collecting data on European communications and planted bugs in EU offices in New York and Washington to detect rifts in the troubled monetary alliance.

Reactions from European leaders were swift and harsh. This is especially true in Germany, where the protection of private correspondence is written into its Constitution.

President Obama shrugged off the report, saying all nations collect intelligence. But this argument isn’t likely to fly with German Chancellor Angela Merkel, a former East German who grew up living under the intrusive eye of the Stasi and Soviet surveillance. She immediately condemned the United States, while a parliament member said Snowden should be rewarded for this information with asylum in Germany.

But the more troubling response, both for the United States and the European Union, came from French President François Hollande. He said that talks on a bilateral U.S.-EU trade deal should be put on hold until questions about the spying were answered.

“We can only have negotiations, transactions, in all areas once we have obtained these guarantees for France, but that goes for the whole European Union, and I would say for all partners of the United States,” he said of the talk set to begin next week. For good measure, French minister of foreign trade Nicole Bricq added, "We must absolutely re-establish confidence... it will be difficult to conduct these extremely important negotiations."

Things could get worse. In a letter asking Ecuador for asylum, Snowden – who is still stuck at the Moscow airport - said he would release more documents that he deemed to be in the public interest. Russian President Vladimir Putin has also opened the possibility of Snowden remaining there.

There’s a lot at stake. The United States wants it’s economy recovery to accelerate, while Europe is desperate for economic growth (the deal is expected to add $157 billion to the EU economy and $133 billion to the U.S. economy).

Now, low-level European diplomats could leverage NSA’s spying to win concessions as negotiations over the deal get underway. Expect France, which has called for provisions to fund French movies and art in the deal, to be especially aggressive with anti-NSA rhetoric.

One can argue about whether Snowden’s revelations have made America less safe. But it’s undisputable that he has caused an erosion of trust between partners and their citizens. This trust is essential in building international trade agreements, as popular support for trade pacts is essential.

Without these pacts, international trade dries up and hundreds of billions are removed from the global economy. Put simply, these agreements eliminate barriers to doing business. For instance, a 2010 Congressional Research report found that exports to countries that are part of the Trans-Pacific Partnership Agreement totaled $747 billion in 2008.

The mistrust also has political implications. Take Germany. Much was known about PRISM when Obama visited Berlin two weeks ago, but according to the German media, Merkel asked few questions about it. Now that the German public is outraged by Snowden’s latest disclosure and has turned on Obama, Merkel will try to harness that outrage to win election in the fall, causing a further strain on German-American relations.

"This could slow down [the EU-U.S. deal] considerably," Joerg Wolf, editor of the Berlin-based open think tank atlantic-community.org, told The Fiscal Times. "European citizens will mistrust the U.S. even more, which then would make it more difficult for EU governments to cooperate with the US in the future."

OTHER DEALS THREATENED BY LEAKSThe U.S.-EU trade pact is not the only one at risk. The pending trade deal between the United States and Ecuador has fallen apart because of Snowden. Last week, Ecuador – a country thought to be considering offering Snowden asylum- withdrew from talks, saying they feared “blackmail” if they refused to offer up the fugitive.

Ecuador risks losing billions in exports to the United States if the deal falls apart. And while the dissolution of the deal hurts the Ecuadorian side more, the end of a two-decade old trade deal represents a diplomatic setback for both sides.

Wolf said there is potential for the same thing to happen with the U.S.-EU deal.

“Whatever U.S. public diplomacy achieved in Germany in the last four years [since George W. Bush's presidency ended], it's gone,” atlantic-community.org’s Wolf said. “Any positive impact President Obama's trip to Berlin two weeks ago might have had, it's gone.”